Management’s Discussion and Analysis of Financial Condition
and Results of Operations – As Adjusted

Segment Results of Operations (1 of 3)

We have two reportable segments, Domestic Wireless and Wireline,
which we operate and manage as strategic business units and organize by
products and services. We measure and evaluate our reportable segments
based on segment operating income. The use of segment operating income
is consistent with the chief operating decision maker's assessment of
segment performance.

Segment earnings before interest, taxes, depreciation and
amortization (Segment EBITDA), which is presented below, is a non-GAAP
measure and does not purport to be an alternative to operating income as
a measure of operating performance. Management believes that this
measure is useful to investors and other users of our financial
information in evaluating operating profitability on a more variable
cost basis, as it excludes the depreciation and amortization expenses
related primarily to capital expenditures and acquisitions that occurred
in prior years, as well as in evaluating operating performance in
relation to Verizon's competitors. Segment EBITDA is calculated by
adding back depreciation and amortization expense to segment operating
income.

Verizon Wireless Segment EBITDA service margin, also presented below,
is calculated by dividing Verizon Wireless Segment EBITDA by Verizon
Wireless service revenues. Verizon Wireless Segment EBITDA service
margin utilizes service revenues rather than total revenues. Service
revenues exclude primarily equipment revenues in order to reflect the
impact of providing service to the wireless customer base on an ongoing
basis. Verizon Wireline EBITDA margin is calculated by dividing Wireline
EBITDA by total Wireline revenues.

It is management's intent to provide non-GAAP financial information
to enhance the understanding of Verizon's GAAP financial information,
and it should be considered by the reader in addition to, but not
instead of, the financial statements prepared in accordance with GAAP.
Each non-GAAP financial measure is presented along with the
corresponding GAAP measure so as not to imply that more emphasis should
be placed on the non-GAAP measure. The non-GAAP financial information
presented may be determined or calculated differently by other
companies. You can find additional information about our segments in
Note 14 to the consolidated financial statements.

Domestic Wireless

Our Domestic Wireless segment provides wireless voice and data
services and equipment sales across the United States. This segment
primarily represents the operations of the Verizon joint venture with
Vodafone, operating as Verizon Wireless. We own a 55% interest in the
joint venture and Vodafone owns the remaining 45%. All financial results
included in the tables below reflect the consolidated results of Verizon
Wireless excluding the results of operations of the Alltel Divestiture
Markets through the date the divestitures were completed (see
“Acquisitions and Divestitures”).

Operating Revenue and Selected Operating Statistics

(dollars in millions, except ARPU)

Increase/(Decrease)

Years Ended December 31,

2010

2009

2008

2010 vs. 2009

2009 vs. 2008

Service revenue

$

55,629

$

52,046

$

42,602

$

3,583

6.9

%

$

9,444

22.2

%

Equipment and other

7,778

8,279

6,696

(501

)

(6.1

)

1,583

23.6

Total Operating Revenue

$

63,407

$

60,325

$

49,298

$

3,082

5.1

$

11,027

22.4

Total customers ('000)

94,135

89,172

72,056

4,963

5.6

17,116

23.8

Retail customers ('000)

87,535

85,445

70,021

2,090

2.4

15,424

22.0

Total customer net additions (excluding

acquisitions and divestitures) ('000)

4,839

5,656

5,779

(817

)

(14.4

)

(123

)

(2.1

)

Retail customer net additions (excluding

acquisitions and
divestitures) ('000)

1,977

4,369

5,752

(2,392

)

(54.7

)

(1,383

)

(24.0

)

Total churn rate

1.33

%

1.41

%

1.25

%

Retail postpaid churn rate

1.02

%

1.07

%

0.96

%

Service ARPU

$

50.46

$

50.53

$

51.55

$

(0.07

)

(0.1

)

$

(1.02

)

(2.0

)

Retail service ARPU

51.56

50.89

51.84

0.67

1.3

(0.95

)

(1.8

)

Total data ARPU

17.73

15.11

12.85

2.62

17.3

2.26

17.6

2010 Compared to 2009

The increase in Domestic Wireless' total operating revenue during
2010 compared to 2009 was primarily due to growth in service
revenue.

Service revenue

Service revenue increased during 2010 compared to 2009 primarily due
to an increase in total customers since January 1, 2010, as well as
continued growth in our data ARPU, partially offset by a decline in
voice ARPU.

The decline in retail customer net additions during 2010 compared to
2009 was due to a decrease in retail customer gross additions, as well
as an increase in churn for our retail prepaid base in part attributable
to a marketplace shift in customer activations during the first half of
the year toward unlimited prepaid offerings of the type being sold by a
number of resellers. Retail (non-wholesale) customers are customers who
are directly served and managed by Verizon Wireless and who buy its
branded services. However, we expect to continue to experience retail
customer growth based on the strength of our product offerings and
network service quality. Our total churn rate during 2010 compared to
2009 improved as a result of successful customer retention efforts.
Churn is the rate at which customers disconnect individual lines of
service.

Total customer net additions decreased during 2010 compared to 2009
due to the decline in retail customer net additions described above
partially offset by the cumulative increase during the year in customer
net additions from our reseller channel as a result of the marketplace
shift in customer activations mentioned above.

Customers from acquisitions and adjustments at December 31, 2010
included approximately 106,000 net customers, after conforming
adjustments, that we acquired in a transaction with AT&T. Customers
from acquisitions at December 31, 2009 included approximately 11.4
million total customer net additions, after conforming adjustments and
the impact of required divestitures, which resulted from our acquisition
of Alltel on January 9, 2009.

Total data revenue was $19.6 billion and accounted for 35.1% of
service revenue during 2010 compared to $15.6 billion and 29.9% during
2009. Total data revenue continues to increase as a result of the
increased penetration of data offerings, in particular for e-mail and
web services resulting in part from increased sales of smartphone and
other data-capable devices. Voice revenue decreased as a result of
continued declines in our voice ARPU, as discussed below, partially
offset by an increase in the number of customers. We expect that total
service revenue and data revenue will continue to grow as we grow our
customer base, increase the penetration of our data offerings and
increase the proportion of our customer base using smartphone and other
data-capable devices.

The decline in service ARPU during 2010 compared to 2009 was due to a
continued reduction in voice revenue per customer and the impact of
changes in our customer mix as a result of increased reseller customer
net additions, partially offset by an increase in data ARPU. Total voice
ARPU declined $2.69, or 7.6%, due to the ongoing impact of customers
seeking to optimize the value of our voice minute bundles. Total data
ARPU increased as a result of continued growth and penetration of our
data offerings, resulting in part from the above mentioned increase in
sales of our smartphone and other data-capable devices. Retail service
ARPU, the average revenue per user from retail customers, increased
during 2010 due to increases in our penetration of data offerings, which
more than offset declines in our voice revenues.

Equipment and Other Revenue

Equipment and other revenue decreased during 2010 compared to 2009
due to a decrease in the number of equipment units sold as a result of a
decrease in customer gross additions.

2009 Compared to 2008

Domestic Wireless' total operating revenue increased during 2009
compared to 2008 primarily due to the inclusion of the operating results
of Alltel, as well as growth in our service revenue from sources other
than the acquisition of Alltel.

Service revenue

Service revenue increased during 2009 compared to 2008 primarily due
to the inclusion of service revenue as a result of the 11.4 million net
new customers, after conforming adjustments and the impact of required
divestitures, which we acquired in connection with the acquisition of
Alltel. Since January 1, 2009, service revenue also increased as a
result of an increase in total customers from sources other than
customer acquisitions, as well as continued growth from data
services.

The decline in retail customer net additions during 2009 compared to
2008 was due to an increase in churn partially offset by an increase in
customer gross additions due to the expansion of our sales and
distribution channels as a result of the acquisition of Alltel. The
decrease in total customer net additions for 2009 was due to the above
mentioned decline in retail customer net additions, partially offset by
an increase in customer gross additions from our reseller channels,
primarily during the fourth quarter of 2009. The increases in our total
and retail postpaid churn rates were primarily a result of increased
disconnections of Mobile Broadband service and business share lines,
primarily attributable to economic conditions.

Total data revenue during 2009 was $15.6 billion and accounted for
29.9% of service revenue compared to $10.6 billion and 24.9% during
2008. Total data revenue continues to increase as a result of increased
use of Mobile Broadband, e-mail and messaging.

Service ARPU and retail service ARPU declined during 2009 compared to
2008 due to the inclusion of customers acquired in connection with the
acquisition of Alltel, as well as continued reductions in voice ARPU,
partially offset by an increase in total data ARPU. Total voice ARPU
declined $3.28, or 8.5% during 2009 compared to 2008 due to the on-going
impact of bundled plans and increases in the proportion of customers on
our Family Share plans as customers sought to optimize the value of our
offerings. Total data ARPU increased by $2.26, or 17.6% during 2009
compared to 2008 as a result of the increased usage of our data
services.

Customer acquisitions during 2008 included approximately 650,000
total customer net additions, after conforming adjustments, acquired
from Rural Cellular Corporation (Rural Cellular). As a result of an
exchange with AT&T consummated on December 22, 2008, Domestic
Wireless transferred a net of approximately 122,000 total customers.

Equipment and Other Revenue

Equipment and other revenue increased during 2009 compared to 2008
primarily due to an increase in the number of both data and phone
equipment units sold, partially offset by a decrease in the average
revenue per unit. The increase in the number of equipment units sold was
a result of both the increase in customer gross additions as well as an
increase in the number of units sold to existing customers upgrading
their wireless devices. Other revenues increased primarily due to the
inclusion of the operating results of Alltel and an increase in our cost
recovery rate.

Operating Expenses

(dollars in millions)

Increase/(Decrease)

Years Ended December 31,

2010

2009

2008

2010 vs. 2009

2009 vs. 2008

Cost of services and sales

$

19,245

$

19,348

$

15,660

$

(103

)

(0.5

)

%

$

3,688

23.6

%

Selling, general and administrative expense

18,082

17,309

14,273

773

4.5

3,036

21.3

Depreciation and amortization expense

7,356

7,030

5,405

326

4.6

1,625

30.1

Total Operating Expenses

$

44,683

$

43,687

$

35,338

$

996

2.3

$

8,349

23.6

Cost of Services and Sales

Cost of services and sales decreased during 2010 compared to 2009 due
to a decrease in the cost of equipment sales, partially offset by an
increase in cost of services. Cost of equipment sales decreased by $0.6
billion primarily due to both a decrease in retail customer gross
additions and cost reduction initiatives, partially offset by an
increase in the average cost per unit. Cost of services increased due to
higher wireless network costs driven by increases in local
interconnection cost, as a result of both higher capacity needs from
increases in data usage as well as costs incurred to transition to
Ethernet facilities that will be used to support the LTE network. In
addition, the increase in costs of services was impacted by higher
roaming costs as a result of increased international roaming volumes,
data roaming and roaming costs incurred in the Alltel Divestiture
Markets, partially offset by synergies from moving traffic to our own
network. Also contributing to higher wireless network costs during 2010
compared to 2009 was an increase in operating lease expense related to
our network cell sites.

Cost of services and sales increased during 2009 compared to 2008
primarily due to higher wireless network costs including the effects of
operating an expanded wireless network as a result of the acquisition of
Alltel. This increase included network usage for voice and data
services, use of data services and applications such as e-mail and
messaging provided by third party vendors, operating lease expense
related to a larger number of cell sites, as well as salary and benefits
as a result of an increase in network-related headcount. These increases
were partially offset by a decrease in roaming costs that was realized
primarily by moving more traffic to our own network as a result of the
acquisition of Alltel. Cost of equipment increased by $2.1 billion
primarily due to the increase in the number of both data and phone
equipment units sold as well as an increase in the average cost per
equipment unit.

Selling, General and Administrative Expense

Selling, general and administrative expense increased during 2010
compared to 2009 primarily due to an increase in sales commission
expense in our indirect channel, as well as increases in other general
and administrative expenses, partially offset by a decrease in
advertising and promotional costs. Indirect sales commission expense
increased $0.8 billion during 2010 compared to 2009 as a result of
increases in both the average commission per unit, as the mix of units
continues to shift toward data devices and more customers activate data
service, and in contract renewals in connection with equipment upgrades.
Other general and administrative expenses such as billing and data
processing charges, non-income taxes, and bad debt expense increased
primarily as a result of the growth of our customer base. Advertising
and promotional costs decreased $0.2 billion during 2010 compared to
2009 primarily due to reductions in media spending.

Selling, general and administrative expense increased during 2009
compared to 2008 primarily due to a $0.9 billion increase in salary and
benefits as a result of a larger employee base after the acquisition of
Alltel, as well as an $0.8 billion increase in sales commission expense,
primarily in our indirect channel as a result of increases in both
equipment upgrades leading to contract renewals and customer gross
additions, as well as an increase in the average commission per unit. We
also experienced increases in other selling, general and administrative
expenses primarily as a result of supporting a larger customer base as a
result of our acquisition of Alltel.

Depreciation and Amortization Expense

Depreciation and amortization expense increased during 2010 compared
to 2009 primarily driven by growth in depreciable assets. Depreciation
and amortization expense increased during 2009 compared to 2008
primarily driven by depreciable property and equipment and finite-lived
intangible assets acquired from Alltel, including its customer lists, as
well as growth in depreciable assets during 2009.

Segment Operating Income and EBITDA

(dollars in millions)

Increase/(Decrease)

Years Ended December 31,

2010

2009

2008

2010 vs. 2009

2009 vs. 2008

Segment Operating Income

$

18,724

$

16,638

$

13,960

$

2,086

12.5

%

$

2,678

19.2

%

Add Depreciation and amortization expense

7,356

7,030

5,405

326

4.6

1,625

30.1

Segment EBITDA

$

26,080

$

23,668

$

19,365

$

2,412

10.2

$

4,303

22.2

Segment operating income margin

29.5

%

27.6

%

28.3

%

Segment EBITDA service margin

46.9

%

45.5

%

45.5

%

The increases in Domestic Wireless' Operating income and Segment
EBITDA during 2010 and 2009, were primarily as a result of the impact of
factors described above.

Non-recurring or non-operational items excluded from Domestic
Wireless' Operating income were as follows:

* This is an interactive electronic version of Verizon’s 2010 Annual Report to Shareowners, and it is intended to be complete and accurate.
The contents of this version are qualified in their entirety by reference to the printed version. A reproduction of the printed version is
available in PDF format on this website.